Extreme weather events the biggest risk facing globe in next decade
Two out of three global experts are concerned that there will be a major natural catastrophe within the the next two years, according to a survey carried out by the World Economic Forum ahead of next week’s meetings in Davos.
Climate change and environmental risk, capped by extreme weather events, ranked second only to misinformation and disinformation in the survey, which surveyed over 1,400 global risk experts, policymakers and industry leaders in September 2023.
Global experts also put climate-related issues as the biggest risk facing the world over the next ten years.
The survey said 30% of respondents expected an elevated chance of global catastrophes in the next two years, nearly two thirds expect this in the next 10 years.
“Extreme weather, critical change to earth systems, biodiversity loss and ecosystem collapse, natural resource shortages and pollution represent five of the most severe risks perceived over the next decade,” the report said. “ However, experts disagreed on the urgency of the risks posed – private sector respondents believe that most environmental risks will materialise over a longer time frame than civil society or government, pointing to the growing risk of getting past a point of no return.”
John Scott, head of sustainability risk at Zurich Insurance, which supported the survey with Marsh McLennan, said: “the world is undergoing significant structural transformations with artificial intelligence, climate change, geopolitical shifts and demographic transitions.
“Known risks are intensifying and new risks are emerging – yet they also provide opportunities. Collective and coordinated cross-border actions play their part, but localised strategies are critical for reducing the impact of global risks.
“The individual actions of citizens, companies and countries can move the needle on global risk reduction, contributing to a brighter, safer world.”
Asked specifically what the re/insurance industry could do to tackle the most dangerous risks, Scott said the industry could help first through risk transfer by moving risk from individuals, companies and countries to insurers’ balance sheets as the industry had been doing for 150 years.
Re/insurers also had a wealth of risk management expertise and modelling capabilities that they could share with businesses and governments to help them manage risk better and more accurately predict where risks could materialise, he said.
Through organisations like the WEF, leaders and decision-makers were also able to come to the insurance industry for advice.
Lastly, insurers could influence companies as large institutional investors.
Carolina Klint, chief commercial officer, Europe, Marsh McLennan, added: “This is an excellent partnership because the industry lives and breathes risk which has risen to the top of the agenda for companies and decision makers.
“If you don’t marry risk and strategy, you can’t make decisions,” she said, adding that risk management was now “in the C Suite”.
The biggest short-term risk identified in the survey was misinformation and disinformation, particularly in the context of a busy election year in which 3 billion people are expected to go to the polls, including in the US, India and the UK.
“Concerns over a persistent cost-of-living crisis and the intertwined risks of AI driven misinformation and disinformation, and societal polarisation dominated the risks outlook for 2024,” the report said. “The nexus between falsified information and societal unrest will take centre stage amid elections in several major economies that are set to take place in the next two years.”
Such risks have implications for cyber and political risk insurers.
Klint said the wide availability of AI presented “fantastic opportunities” and risks.
She said: “Cyber threats and misinformation are higher risks now than in the past.”
She said AI could affect election results which would undermine the credibility of elected governments and democratic institutions.
She noted that AI also provide cyber criminals with new pathways.
“They don’t have to be smart to be cyber criminal,” she said. “But AI can also provide better responses to cyber attacks.”
